China- According to S&P Global Ratings’ Asia-Pacific chief economist, it is China’s service sector that slows for rebounding from the Covid-19 pandemic, which is one of the aspects of the economic recovery which has been downplayed.
In 2020, despite challenges due to Covid-19, China was the only country that grew last year. It’s reported that the growth enhanced to 2.3% in 2020. On the other hand, the performance across sectors was irregular with exports by staying resilient although consumption will continue to lag.
On Wednesday, Shaun Roache mentioned the news channel, “This is one of the most understated aspects of China’s recovery, the fact that it is so unbalanced.” He also added, “China’s Covid strategy has been successful from a health perspective, but it is imposing a long-run economic cost in the sense that … we’re seeing the services sector come back much more slowly than people thought. That’s depressing jobs and that in turn is depressing consumer confidence.”
Roache pointed that the Chinese sales didn’t recover to levels seen prior to the pandemic. In 2019, it is found that China reported growth of monthly retail sales of above 8% year-on-year. However, in every month the sales have been contracted every month since March last year, as the COVID-19 has forced the grander bands of the economy to close down.
A professor at Peking University’s Guanghua School of Management, Michael Pettis mentioned that the slow recovery in consumption is a result of China’s policy responses to Covid-19.
He mentioned that the Chinese authorities have placed a greater emphasis on boosting up the supply of the economy. However, this means that the measures aimed towards helping the business and industries.
On Wednesday, the uneven state of the industries and consumers in China was reflected in the latest inflation data released. As per official data, it is found that the producer price index has risen to 1.7% in February which is compared to a year ago. Almost the consumer price index diminished by 0.2% in the same period.
On Wednesday Pettis also stated, “Unfortunately, China’s reaction to Covid-19 was very different from that of the rest of the world. While most of the world saw Covid-19 as a demand-side shock and responded with policies that really boost demand, income distribution, things like that, China really responded as if it were a supply-side shock and almost all their responses were aimed at the supply side.”
The professor also added, unless there is any shift in the policy focus of China, “it’s very hard to see where that domestic demand is gonna come from.”
However, China mentioned that the country wants to bring balance to its economy by focusing highly on the domestic market. Pettis said that it is to be seen that how much successful the country is going to be after years of relying on debt for growth.